Trick question poll......

[almost there]

How much would a couple need to retire at 55 with annual income of 60k? Assuming a 4-5% post retirement rate....with... 2-3% inflation.
No debt, 85% med coverage till 65, $1800 SS at 62

Used many calculators, read books, talked with several financial planners and have as many opinions.......
Just curious what this group comes up with as I have much respect for the posters here (where I am more of a lurker)

 

[Rich_by_the_Bay]

Sounds like a lottery. Not enough information, but heck, I'll play...

$1.5mm (=expenses x 25, inflation-adjusted)

Remember that taxes are treated like any expense in my assumptions, thus must come out of your annual $60k.

 

[almost there]

"Not enough information"

What detail would help?
Good health / State Calif.
Or something else?

(Its a trick question as there seems to be no "right answer")
LOL LOL

 

[golfnut]

Voted greater than $1.5mm. A 4% WD rate at age 55 seems too high. Maybe rachet it down to 3.5% which would equate to needing approx. $1.7mm.

Just an uneducated guess!

 

[Midpack]

Your returns and inflation assumptions look pretty typical for most models (based on the past at least). I didn't bother with your Soc Sec assumptions, they'd make a difference, but guess I'm too lazy to do the math for a casual poll. Just go plug your info into FIRECALC, that's my answer.

I've often heard the indefinitely sustainable SWR is 3%, so I voted for more than $1.5MM ($60K/0.03).

I believe 4% is generally considered the SWR for a 65 year old, or someone with a 30 year plan. Hopefully a 55 year old would be shooting for 40 years ±. My 2¢...

 

[rescueme]

How much would a couple need to retire at 55 with annual income of 60k?

Assuming you die at age 56, a lot less than most folks plan for. Your request is missing a lot of basic info.

 

[almost there]

Some basic info:
No plans for being hit by a bus.

 

[OrcasIslandBound]

Exactly what we are aiming for, only we'll have to buy health insurance at full freight when we FIRE in 3 years at 56. We plan on $1.5 million, so believe that we'll have an income of $50 - $60k depending on how things go. We'll also have SS available 6 years after that. We need to curtail our expenses to get down to $50 - $60K, especially when we account for that $%^#@& health insurance bill.

- Stephen

 

[Nords]

Used many calculators, read books, talked with several financial planners and have as many opinions.......

So what did FIRECalc report?

What conclusions have you drawn from your survey thus far?

 

[LOL!]

Tell us about SS income: None? One spouse? Both spouses? How much? What ages?

Why $1800 SS at age 62? Why not wait until 70? What if one spouse dies?

 

[Independent]

You've already run the calculators, so you're just looking for a back-of-the-envelope gut check? I'd do simple interest.

I'd defer SS to age 70 when it will be $38k. Between now and then you need 15 x $38k = $570k to fill the SS gap. That ignores the interest you plan to earn.

On top of that, you'll need $22k annually from investments. Using your real return of 2%, you can get that from $1.1 million of assets without invading principal. So about $1.7 mill.

If you want to factor in the interest on the $570, and spend principal down over 40 years, then a spreadsheet calculation at a fixed 2% interest rate says $1.25 million if you start SS at 62, and $1.15 million if you start SS at 70. If you want to plan an some minimum estate (or contingency fund) at 95, take the estate target and divide by 2.2 and add that. For example, a $250k goal requires an additional $113 of initial assets.

I see your 2% real return and immediately think about TIPS. I'm a very conservative investor, so if my plans work at 2%, I'll consider TIPS as a way to avoid market risk, and that justifies the fixed interest calculations.

I'm assuming all sorts of stuff like most of your assets are in tax-deferred accounts and your $60k includes taxes, etc.

 

[almost there]

"So what did FIRECalc report?" 1.4m = 80% chance 60k for 35 yrs. (Does FIRECalc include SS?)

"What conclusions have you drawn from your survey thus far?"
1.2m to 2.5m (Folks that would be getting a % give the largest numbers) 1.4 seems do-able to me.
"Financial Engines" say poor market I would have 72k / ave market 82k per year. Seems optimistic to me though as they use a silly 8% return or something.

"Tell us about SS income: None? One spouse? Both spouses? How much? What ages?"

Mine only. Wife does not have quite enough credits

"Why $1800 SS at age 62? Why not wait until 70? What if one spouse dies?" In case I get hit by a bus at 63, I max out every year in Oct/Nov.
I have put in ton's and refuse to wait. Just me I guess.

Cash ballance pension, savings & 401K at 55, Will fund our 2 Roths till 59, SS at 62. Thats my plan anyway. plan to go to 20% lo risk Mut funds, 20% short term bonds 60% CD's.

Good info from Independent, Am thinking along those lines.

Also, 60k is actually more than I need. I just like to be on the safe side.


One of the main points here is that as simple as this seems, there are several opinions.

Pro's are always high, most programs use much higher returns than we will really get, and if your not sure just say "more". Its always the safe answer.

Just wanted to do this for fun...

 

[W2R]

If I was retiring at 55 or younger, then my retirement plan would need to last for 35-40 years in case I lived to be very old. So, I wouldn't want to withdraw a full 4%. YMMV

 

[hakuna matata]

"So what did FIRECalc report?" 1.4m = 80% chance 60k for 35 yrs. (Does FIRECalc include SS?)

It is on one of the tabs, you can add it in if you want. Did you add your Roths in there too? First time I did FIRECalc I didnt' realize there were other tabs, but once you get into it you can do a lot of variety. For example on that same tab as the SS is an area you can add in a pension or a lump sum, etc. So you might want to add SS and re-run it.

 

[LOL!]

Re: Financial Engines result and high withdrawal rate: FE assumes you take your entire retirement nest egg and buy a single premium immediate annuity. I don't know about whether it is inflation-indexed nor if it includes survivor's benefits. In any event, with such a financial instrument, when you die, you have no money for heirs or survivors. OTOH, you cannot run out of money while alive if your annuity provider doesn't have hiccups.

 

[almost there]

Good info, thats why I come here!

I have tried the SS option page.
"Pensions, "Off Chart" Spending Changes, etc."

And did not find it very user friendly.
In other words, I didnt really get it when I plugged it in.
Pension Income (or off chart spending reduction) Off Chart Spending
starting in Inflation adj?

 

[almost there]

Is this type too basic?
Calculators - Retirement Planner


In retirement, you and your spouse will need $60,000 a year in income. (Because of inflation, in 2016, that will be equivalent to $69,556.)

Part of that income will come from your Social Security and/or pensions. To produce the rest, you and your spouse should build up your nest egg (including your 401k, IRA and other savings accounts) to $984,749 by the time you retire. (In 2016, that will be equivalent to $1,141,595).
YOUR CHANCES OF GETTING THERE
To save $984,749, your investments need to gain an average of -0.64% from now until retirement. We estimate that there is a 99% chance of this happening.

 

[obgyn65]

IMO this CNN calculator is too basic. Try this one instead :

See Where You Stand | Merrill Edge Retirement

Is this type too basic?
Calculators - Retirement Planner

 

[chinaco]

These polls are difficult because there are always other variables.

This is completely a guess because you did not provide much information.

If it were me and all I had was the nest egg... Assuming that health care costs are in the $60k. I would want to have more than $1.5M. As MidPack suggested 3% would allow some safety due to longevity.

But if I had other income resources due (pension and/or SS... with a cola that was around $25k or $30k) and the 60k from the nest egg include a large amount of discretionary income (say 40 or 50%)... I would be ok with $1.5M at 4%. Because I could reduce the discretionary spending and not affect my base lifestyle if things did not turn out as planned.


Others may castigate me for this statement... but if you only have one SS and are borderline on the nest egg... you might do some "what if" planning exercises that include the use of a spia (purchased with some portion of the assets).... and compare it to keeping everything in a portfolio. Compare best case, worst case, and likely scenarios.


Take a look at Jim Otar's book "unveiling the retirement myth". Consider all of the tools at your disposal to make a retirement plan work. His book lays out many of the approaches and provides the pros and cons along with a framework to help one understand how to make certain decisions.

 

[rescueme]

Re: Financial Engines result and high withdrawal rate: FE assumes you take your entire retirement nest egg and buy a single premium immediate annuity. I don't know about whether it is inflation-indexed nor if it includes survivor's benefits. In any event, with such a financial instrument, when you die, you have no money for heirs or survivors. OTOH, you cannot run out of money while alive if your annuity provider doesn't have hiccups.

Another glitch with FE is that it uses standard tables to guesstimate how long you will live, rather than be a bit more conservative and plan out till age 100 or so. That's why the spend rate is much higher than other forecast products and makes the plan "survivable".

Along with not being able to use the product if you are already retired (you can fool it by giving it a false birth date) it is of little use IMHO.

When comparing it to another “free” product such as FIDO's RIP (you have to have a FIDO account to use it) and you can specify all parameters including multiple income/expense streams, by year (sorry, FIRECalc is limited in this area - only allows you three) and having output that will give you year by year breakdown of withdrawal (both $$$ and rate), RMD's, taxes, and other detail data, a product like FE doesn’t even come close to giving you a good calculated guess.

 

[Free To Canoe]

Mine is the "whistling past the graveyard" view (time is more valuable than money). How much should you have? As much as possible.
What is the minimum needed to do this? 5% is doable. I voted $1.2M.

 

[almost there]

More great info.

What amazes me a little bit, is the amount of folks here with a COLA type of pension V. S. the % of folks who actually still have them. Most were fazed into 401k's in the 90's other than State /Fed workers.

My initial thinking was to keep the exercise simple without too much detail so it would be more of a basic math question. I gave a % of post Ret return rather than a variable such as rental income, windfall, etc.

Even that seems tough to nail down.

But am no surprised with the results, and am having fun!

The one from Merrill is helpful. I have actually been working with a guy from Merrill this year and am very impressed. They have a program with large Co's and offer free planning / personal plans when folks get close hoping to gain their business when retired. The personal plans they offer are very helpful. And am using their model with my 401 this year.
In Jan my 401k finally offered a "Self-Directed Brokerage Account" with
access to just about everything. Its now cut up into "balanced by age / risk tolerance" 5% here, 10% there etc.
And so far has proven safer than almost anything offered with a 4+% return this year. Just some added info......

Not sure where this thread is going, but 1.5 seems to be just more than enough using most models / calculators.

 

[almost there]

I voted 1.3

More is always better though....

Also depends on your mood at the time, or the book you last read.

I just finished " Get a Life"

 

[almost there]

bUmP

 

[East Texas]

How much would a couple need to retire at 55 with annual income of 60k?

It's not how much you make, it's how much you spend.